In the aftermath of the the Consumer Financial Protection Bureau’s (CFPB) lawsuit against Navient, the largest student loan servicer in the country, we wanted to get in touch with our readers about what this could mean for their own student loans.

“Navient–formerly known as Sallie Mae–allegedly cheated consumers at every stage of the repayment process,” student loan expert Rohit Chopra told Generation Progress. “If you believe you were a victim of shortcuts or deception, you should file a complaint with the Consumer Financial Protection Bureau to get immediate help.”

It’s worth noting that a separate consumer class action lawsuit was filed days after the CFPB announced their lawsuit for borrowers that attempted to pay off their loans earlier by making larger payments than their monthly payment plan required them to. You can read more about whether you qualify for restitution under the Florida consumer class action lawsuit here.

Read on even if Navient is not your student loan servicer. We think this lawsuit serves as a warning shot to other servicers who may be getting away with the same practices that put financial interests above consumers’ interests.

If Navient is your loan servicer:

Compensation for injury is not guaranteed: The CFPB is requesting that the court order Navient to pay restitution to affected borrowers in addition to a financial penalty. But because CFPB is a government agency and this lawsuit is not a class action lawsuit you should not expect redress at this particular point in time.
You may be able to fire Navient: For borrowers with older federal student loans (under the FFEL program), you can consolidate your loans into Direct Loans and choose your servicer. You’ll also be able to enroll in more generous income-driven repayment plans and Public Service Loan Forgiveness.
You should keep making your monthly payments on time: If you can afford to keep making your monthly payments on normal schedule you should absolutely do so. If you can no longer make your monthly payments, visit studentloans.gov to enroll in an Income-Driven-Repayment (IDR) plan. This can help you even if you are currently unemployed.
You can follow us to view the progress of the CFPB lawsuit.

If Navient is not your loan servicer:

Find out who your lender and servicer are: You can find out who your loan servicer is and get their contact info by logging onto your Federal Student Aid profile with your Federal Student Aid ID. Create an FSA ID if you don’t already have one.
Know your rights as a borrower: You can find the full extent of your rights as a student loan borrower here.
Understand all of your repayment options: Your loan servicer is supposed to help you navigate the many ways you can successfully repay your student loans but, as history shows us, these companies don’t always have consumers’ best interests in mind. That’s why it’s so important to educate yourself on the many repayment options for your unique financial situation. Find out about student loan refinancing, income-driven repayment, federal student loan consolidation and student loan forgiveness.
Additional hot tips:
If you’ve made payment decisions with your loan-servicer over the phone make sure you also confirm any changes in writing.
Enroll in automatic monthly payments, which may reduce your interest rate and also guarantees your loan-servicer is always receiving your payments.
File a complaint: If you’ve had a bad experience with your loan servicer or you think it is committing some of the same acts that Navient was sued over, you should file a complaint with:
Consumer Financial Protection Bureau
U.S. Department of Education
Your lender
Your servicer
Senya Merchant is an Organizing Associate for Generation Progress.

I’ve gotten a ton of clients asking me about the Trump administration’s plans in regards to the Public Service Loan Forgiveness program (PSLF). For those who don’t know, PSLF allows you to work for a not for profit employer for 10 years and receive tax-free loan forgiveness. For many borrowers burdened by huge amounts of student debt, PSLF is their only hope. Here’s how you should prepare your finances if you’re worried about Trump repealing PSLF.

Act Like Trump Repealing PSLF is Not Going to Happen

I had an interesting conversation with a client a couple days ago about their $200,000+ student debt balance. She had the ability to refinance and was incredibly worried about Trump repealing PSLF. Hence, her thought was why not go ahead and lock in a lower interest rate and pay everything off. Otherwise she would have to take her chances with whatever the new administration will do over the next 10 years.

If she stays on PSLF and files her certification paperwork, she’s on track to save about $200,000. If she refinances and avoids waiting around 10 years to find out PSLF doesn’t exist anymore, she could save about $50,000.

Let’s think about this scenario like I would as a former bond trader. One outcome gives you savings of $200,000. The other outcome gives you savings of $50,000. The two options are mutually exclusive, meaning PSLF can’t exist and not exist at the same time. Therefore, if I wanted to decide what to do, I would multiple each of the numbers by the probability of each event and sum them.

What is the PSLF Repeal Probability?

This is a hard question to answer without freaking anyone out, because PSLF is almost certainly going to be repealed. However, the major question is HOW. The 2015 Republican repeal plan grandfathered in anyone who currently holds federal student debt. It does not apply to anyone seeking new debt.

The Democrats also effectively proposed their own repeal plan in President Obama’s budget around the same time. The President tried to limit PSLF to $57,500 in max benefits. The Democrats’ PSLF repeal plan was actually far more damaging than the Republicans for current borrowers.

Fast forward to January 2017, and Republicans have all the levers of power. Therefore, my expectation is that Trump repealing PSLF will happen within 12-18 months, especially given how the confirmation hearing for his Education Secretary hardly mentioned student loan policy. However, current borrowers are very likely going to be grandfathered in when the repeal happens. I’d put the odds at about 85% that this will happen, with odds of 15% that current borrowers will be completely screwed over. I’ll say though that these probabilities are my educated guess and take them with a grain of salt.

Now Calculate the Expected Value of Staying on PSLF

Going back to the earlier example, say you have $200,000 of savings under PSLF or $50,000 in losses if you stay and it gets repealed. With my probabilities, the expected value of staying on PSLF is $200,000*0.85+(-$50,000)*0.15=$162,500. Even if the probability is 50/50, the expected value of staying on PSLF is still very positive.

Therefore, if you’re looking at PSLF logically as an investment professional would, you need to be staying on the program if your savings are significant.

So what about my guess that there’s a 15% chance that Trump repealing PSLF becomes reality? If I told you that there was a 15% chance of something horrible happening, you wouldn’t feel so good. That’s why you need to prepare your finances just in case the worst becomes reality. After all, many election models had Trump’s chances at below 5%.

Borrowers going for PSLF fall into two camps. The first group could pay their student debt off if they wanted to. They’re pursuing PSLF because it’s a better financial decision, not because it’s their only option. The second group can never repay their student debt. They will be forced onto private sector loan forgiveness in the absence of PSLF.

Borrowers in the first group will have debt to income ratios below 2. They will refinance their loans with a lender like the ones in my sidebar above. Then, they’ll get the lowest interest rate they can and pay it back.

Borrowers in the second group will need to save a lot of money. For repayment plans like IBR, an individual with a $400,000 student debt balance might have a balance of $600,000 after 25 years of not covering the full interest payments. That borrower would then owe taxes on the $600,000 forgiven balance as if it was income. The only way to pay that burden is to save $500-$1,000 a month in an investment account at a place like Vanguard. When the tax bomb hits, you withdraw the full amount, pay taxes on your capital gains, and pay off the tax debt.

Set Yourself Up For Success Regardless of What Happens with PSLF

Trump repealing PSLF would be bad news for a large number of borrowers. That said, it doesn’t have to be a disaster. Plan for PSLF with your loan repayment strategy. Fill out the PSLF certification form. Maybe consider submitting it every 6 months instead of every year.

If you stop building progress towards tax free loan forgiveness, you’re giving up the potential future savings that could very well happen. We’re all probably going to be dealing with higher tax rates in the future anyway, so you might as well get all the benefits you’re eligible for.

ATI Career Training Centers In Texas Rips Off Students

ATI Career Training Centers in Texas were informed by the Texas Workforce Commission that they were to cease enrolling students in their programs as of 2014. ATI, a formerly $400 million company may have gotten away with ripping off its students and the taxpayers for several years, but with the closure of its 16 Texas-based campuses, Texas students will no longer become victims of this for-profit scam artist.

A former employee turned whistleblower led officials to investigate ATI and their discoveries about the company’s practices were quickly found to be true. Predatory enrollment practices were in place which had officials targeting strip clubs, homeless shelters, and low-income neighborhoods for prospective students. If students didn’t have the required educational backgrounds, no worries, ATI would simply forge any compliance documents required in order to make the student eligible for federal financial aid programs. Students unable to speak English were also enrolled in English-only classes to fill seats and meet the strict enrollment requirements set out by administration.

ATI committed fraud in several ways and was found to be fiddling around with grades, attendance reports, transcripts, and those who had never even set foot on campus found they had huge loans in their names which had been sent directly to ATI. If that weren’t enough, officials also discovered that ATI was lying about its job placement successes and job placement salaries. It was even found that companies listed as employing graduated ATI students had no such employees on site.

The investigation which led to this demand by TWC claims that ATI was lying about its job placement reports and that students were not even working in the places it indicated. These false hopes came with a hefty price tag and left many students unable to find employment or pay off their student loans. Texas told ATI that current students must be allowed to finish the program at no additional cost or that ATI must arrange for students to complete their program at a comparable school at no charge to the student.

Why go through all that, you ask? ATIs fraudulent and predatory actions allowed them to dip into lucrative federal student loan programs and Pell Grants they could never have gotten their hands on otherwise without doing things by the book. The systemic, nationwide fraudulent activity got the company to a $400 million net worth but all it got students was huge debts and expensive fire starter.

Students enrolled in programs and failing were often recycled into other programs by the school in order to continuously receive federal student loan disbursements, maintain their eligibility status, and receive new funding. In the end, many of these students failed to meet course objectives, maxed out their federal loan amounts, and had no education to show for it. With tuition fees ranging from $13,741 to $46,744 per program, those dollars certainly added up quickly. Students showing interest in the predatory enrollment schemes were lured in by the rosy picture painted that they could escape poverty forever with ATIs guarantee of job placement with hefty salaries at the end of their programs.

While recent suits have resulted in settlements, none of them mean that ATI has had to admit to any wrongdoing. What’s $3.7 million to a company that defrauded the people and government out of $400 million, after all? Approximately $2 million of those settlements will go to refunding federal student loans for moneys ATI wasn’t entitled to, the remainder will go to other arbitration and a portion of what is left will go to the whistleblower that turned ATI in. Those not part of the settlement are left to struggle with student debt for years to come, have few job prospects with their diploma, and many didn’t even manage to get out of it with the paper in hand. Those students who are affected by the settlement will still have to find another college, go through the entire program, and effectively start from square one.

If you feel you were defrauded by the school you attended or you are being treated poorly as a distressed borrower by your creditors, contact StudentLoanFAQ's and speak to one of our advisors about student loan forgiveness. You may qualify to consolidate or even wipe out your remaining student loans.

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